Unfinished Business: Nested Acquisitions, Managerial Capacity, and Firm Performance

We highlight a largely unstudied phenomenon that affects postacquisition performance: nested acquisitions. Nested acquisitions occur when a firm acquires a target firm that has itself recently acquired another firm. In our study of publicly traded U.S. acquirers and targets from 2000 to 2014, we theorize that nested acquirers face unique integration difficulties that reduce acquirer postacquisition performance. Specifically, we build on Penrosian logic and theorize that nested acquisitions tax the managerial capacity of the acquiring and acquired firms more than nonnested ones and that, as nested acquisition complexity increases due to variance within the embedded nested targets (i.e., greater number, more recent, less related, and larger nested targets), the drain on managerial capacity also increases. Ultimately, these challenges increase the likelihood of reduced postacquisition performance. Given these suggested difficulties, we theorize that retaining focal target managers can aid the acquiring firm and thereby help to reduce negative performance outcomes. In our unique sample of matched-pair firms, we find that nested acquisitions are associated with lower postacquisition performance but that retaining target firm managers can reduce this effect.

Home Country Institutions Behind Cross-Border Acquisition Performance

How do home country institutions influence cross-border postacquisition performance? We develop an institutional framework showing that informal and formal institutions not only have important individual effects but also work together in complex and interesting ways. While collectivism and humane orientation (two major informal institutions) can facilitate postacquisition integration and firm performance, shareholder orientation and property rights protection (two formal institutions) constrain postacquisition integration and firm performance. As acquirers are simultaneously embedded in their home countries’ informal and formal institutions, we further hypothesize that the positive effects of collectivism and humane orientation can be weakened by incompatible formal institutions that hamper postacquisition collaborative efforts. We find strong support for our hypotheses in a multilevel analysis of a sample of 12,021 cross-border acquisitions involving 43 home and target countries between 1995 and 2003.

The post-acquisition performance of acquired companies: Evidence from the Republic of Serbia

This paper explores the post-acquisition performance of acquired companies in the Republic of Serbia, and whether company size is a factor of postacquisition performance. The data were collected from 91 managers in 10 acquired companies in Serbia. The acquiring companies came from Germany, Austria, Italy, Switzerland, Belgium, Norway, Greece, and Serbia. The results of the analysis show that 70% of managers believed that there had been improvement in post-acquisition performance. The improvement in performance was achieved for the most part by cost reduction. The results of this study indicate that there are statistically significant differences between large, medium, and small companies. Large companies had the best improvement in financial performance, and medium companies were the best regarding improvement of non-financial performance.

Organizational Structure and Acculturation in Acquisitions

A congruence model of organizational design suggests that the consistency among strategy, structure, and culture enhances organizational performance. In this study, the author attempts to understand which strategy-structure and strategy-culture contingencies facilitate superior postacquisition performance. From the perspective of task interdependence, the author argues that different acquisition strategies (i.e., unrelated, vertical, related) require different levels of headquarters centralization and interdivisional integration in the organizational structure, as well as different degrees of acculturation in the organizational culture. Based on input/output (I/O) analysis, the author develops theoretical measures for different acquisition strategies to test these arguments. The results from a two-stage model capture the author’s arguments by using a sample of 154 acquisitions in the Taiwanese electronics and information sector.